Abstract
Abstract The income share of the top 1% of earners in the USA increased to 20% in 2014. The increase in income inequalities is contemporaneous with the rising market concentration across industries. This article shows that both developments are linked: top executives in more concentrated markets receive more pay than those in less concentrated markets. Superstars—the best-paid and most experienced chief executive officers—are paid significantly more than other executives in concentrated markets. Investors also receive higher returns in more concentrated markets, while the average worker’s wage does not increase. The link between market concentration and top executive pay is higher in information-technology and R&D-intensive industries. While larger firms pay their executives more, they pay relatively less (more) than smaller firms if their market is more (less) concentrated. We do not find effects of the governance quality and trends in firm stock market valuation on the executive pay premium from concentration.
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